5 Stocks the Pros Love This Summer - views

BALTIMORE (Stockpickr) -- The
"most-hated ‪market rally" in history is turning into the "most-tolerated rally" in history. And that's increasing professional investors' willingness to pick up stocks again.

Fund managers are being selective, but they're buying again in 2013 -- even if it's not with both hands just yet.

Part of the reason that professional investors are piling back into stocks is performance-driven. With so many funds out of equities in late 2012, there's been a scramble to catch back up to benchmarks that continue ticking higher. The old adage goes that everyone looks like a genius in a bull market -- but that's only true in markets in which everyone's allocated to stocks. At the start of 2013, equity allocations were pathetic, so now portfolio managers are in buy mode again for their favorite stock names.

Institutional investors with more than $100 million in assets are required to file a 13F -- a form that breaks down their stock positions for public consumption. From hedge funds to mutual funds to insurance companies, any professional investors who manage more than that $100 million watermark are required to file a 13F.

In total, approximately 3,400 firms file 13F forms each quarter, and by comparing one quarter's filing to another, we can see how any single fund manager is moving their portfolio around. While the data is generally delayed by about a quarter, that's not necessarily a bad thing. Research shows that applying a lag to institutional holdings can generate positive alpha in some cases. That's all the more reason to crack open the moves being made with institutions' $16.3 trillion under management.

It's been a good year to be a BlackRock (BLK) shareholder. Shares of the asset management giant have rallied almost 34% year-to-date. That shouldn't come as a huge surprise, though -- BlackRock is the biggest investment manager in the world, with $3.8 trillion in AUM.

As this rally keeps propelling stocks in 2013, it's also inflating BlackRock's revenues along the way. Last quarter, funds increased their collective stakes in BLK by 37%, picking up another 37 million shares. That makes funds' total position in BLK worth more than $35 billion right now.

BlackRock owns an attractive business right now. Because its clients are predominantly other institutional investors, BLK boasts stickier revenues than more-retail-focused peers. That's not to say that retail investors aren't an attractive client base for BlackRock. The firm's still-limited exposure to retail business gives it a big opportunity in the years ahead, especially after its game-changing acquisition of Barclays Global Investors. Another shift from the BGI purchase is increased exposure to equities (before that, BlackRock was known for being a fixed income shop). Since stocks come with higher management fees, bigger AUM in equity means bigger revenues for BLK.

New changes in investment fund regulation have been good and bad for management firms lately. The SEC loosened marketing restrictions on hedge funds, which BlackRock markets to its clients, while tightening money market fund restrictions. Ultimately, the rule changes are a small net gain for BLK, but it could become a bigger impact as more investors opt for alternative investments over fixed income in this low rate environment.

So far, professional investors' bet on BlackRock appears to be paying off.

Citigroup

Citigroup (C) is another staid financial sector name that's getting bought up by institutional investors in 2013. Citi is one of the biggest banks in the world, with 1.9 trillion in assets and more than a quarter of a million employees. Despite struggling to survive the financial crisis of 2008, this $152 billion bank has re-emerged as strong as ever -- as long as investors are cognizant of changes to Citi's core business, that is.

Citi isn't the same company that it used to be. Since coming out of the Great Recession, the risks that the firm is allowed to take have been restricted by rule. That doesn't just limit the implications of an economic hiccup for investors -- it limits Citi's potential upside too. Remember, less risk in the bad times means less reward in the good times too. That said, since Citi has returned to actually being a bank again, its good times haven't exactly been lacking. Net margins still weigh in deep in the double digits; now the key is that it also sports a loan book that's a whole lot less scary.

A new CEO in Michael Corbat isn't likely to bring about many insane changes in 2013. Instead, expect the firm to keep executing well. As interest rates start floating higher in the intermediate term, so too should Citi's profits. That makes buying in a low-rate environment all the more attractive. Institutions picked up 82.3 million shares of Citigroup last quarter.

Telus

One major conviction buy in the last quarter came from Canadian telecom firm Telus (TU), a stock that went from nearly zero U.S. institutional ownership to firms building a 362 million share position in the Vancouver-based communications stock. So what do the pros like about the Canadian carrier?

Telus is a firm on the mend. Despite a major position in Canada's telecom infrastructure that spans more than more than 7 million phone customers, 3.5 million fixed-line subscribers and nearly 1.5 million internet and TV subscribers, the firm has been struggling to increase the revenues that it earns from each user in its customer rolodex. But rivals haven't. Now, though, the revenue challenge appears to be lessening, especially as smartphone usage continues to increase alongside newer offerings like TV.

Subscriber churning is like kryptonite for a firm like Telus. Because of the huge costs of customer acquisition, losing names to a rival is a major concern. Telus' ability to keep churn rates low in recent quarters is a major plus for shareholders. While antitrust rulings make growth by acquisition in Canada look less viable, TU should have upside ahead of it now that it's finding success selling add-on services to its existing base again.

Celgene

Biopharmaceutical firm Celgene (CELG) is enjoying some stellar performance in 2013. Shares of the $50 billion name have rallied more than 53% since the calendar flipped over to 2013. A lot of the firm's success can be traced to the success of its cancer and immunology drugs. Offerings such as Revlimid, Thalomid and Vidaza combined with prospects such as now-approved Pomalyst are getting investors excited.

Celgene's pipeline looks strong, despite a lack of diversity in the diseases that the legacy firm's drugs treat. As CELG's researchers come up with new indications for existing therapies, the firm should be able to generate material increases in sales. Growth by acquisition has been a major strategy for management in recent years, adding Abraxis BioScience and Pharmion under the firm's umbrella -- and all of their intellectual property and research capabilities along with it.

From a financial standpoint, Celgene has plenty of dry powder to keep up its strategy. Its $3.5 billion cash position more than offsets a $3 billion debt load, and the firm's true cash generation power is masked by the fact that its $2 billion in annual free cash flow generation has been offset by major investments in recent years. Now the firm has a chance to return extra value to shareholders in 2013. Funds picked up 4.85 million shares of Celgene in the most recent quarter.

Chevron

Oil and gas supermajor Chevron (CVX) may seem like a surprising name to see on institutional investors list of most-loved stocks. After all, the energy sector has been struggling to keep pace with the S&P 500 this year, and in the aggregate, funds had a net decrease in their energy holdings. But Chevron wasn't a decrease -- funds picked up around 4 million shares this year, hardly conviction buying but buying nonetheless.

Chevron owns proven reserves of 11.3 billion barrels of oil equivalent and produces around 2.6 million barrels each day, enough to make it the No. 2 oil company in the country. But all of that is less important in a market that's valuing quality above all else. Instead, Chevron's best-in-breed balance sheet likely has something to do with all of the portfolio managers who've been buying shares. At last count, the firm boasted a $3.2 billion net cash position.

The oil business isn't about instant gratification, which means that all of the high-dollar exploration efforts that Chevron has been investing in over years past (when oil was at peak pricing) are only just starting to pan out. Obviously, it takes a lot of oil and gas to materially impact sales for a firm with CVX's scale, but the firm has many pots on the fire. Hefty exposure to liquids should have an even more dramatic impact on sales if oil prices resume their upward trajectory in 2013.

At the time of publication, author had no positions in stocks mentioned.

Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.